I’ve been interested in Bitcoin for a few years now and started investing in small quantities a couple of years back. Literally every time there’s a big price rise I start getting the fear that it’s a bubble and am tempted to sell out. Then there’s the other part of me that wonders if this is like my first experience of the internet in 1997, and whether it will continue to grow in that manner. The internet is really quite difficult to avoid now in the UK.
Fiat currency is inflationary i.e. as much as is needed (and probably more…) will be created by your government and it’s subsidiaries (the banks in the UK), which means that if you save in fiat, a fixed amount will likely become worth less over time due to the effects of inflation. Now Bitcoin is a different fish; only 21 million can ever be created, which effectively means it is deflationary. Buying a deflationary asset with an inflationary one will automatically mean that the deflationary one will go up in price, when measured in the inflationary one. It’s just maths.
The problem with this is that humans do the valuing, and they are quite emotional. Hence bubbles happen. They don’t only happen because of emotion though, they can occur as a result of legislation or politics or numerous other things. Compare the current UK housing bubble caused by cheap debt and lax rules on buy-to-let.
Much as I want to believe Bitcoin is the new saviour, I don’t feel it is, hence I’m keeping a close on eye on things and taking profits as and when I see fit. Whilst the meme says HODL, I’m trying to take a bigger picture view on the off-chance that the forthcoming cryptopia™ doesn’t happen. The fact that Bitcoin is deflationary suggests to me that it won’t perform as a currency, even with Lightning Network in place. For example, I tried to make a Bitcoin transfer earlier and suggested transfer fees were thirty quid. For future reference, a can of decent lager is around a quid in the shops in the UK. Fuck that I thought. Bitcoin may function as a digital version of gold, but there will an alternative currency that wins out as the day-to-day use one.
So what would I look for? Almost instant (5 seconds?), increased every year in proportion to the global population by some measure that is difficult to game [difficult one] and insanely cheap to send (free?)
I’m not really up on everything out there, so this may already exist (tell me!), but